A guide to a flotation on the Emerging Companies Market

www.pwc.com/cy

Cyprus Capital Market Groups

October 2011

2 PwCCyprus

AguidetoaflotationontheEmergingCompaniesMarket1

On30thSeptember2009theCyprusStockExchange(“CSE”)launchedanewmarketcalledtheEmergingCompaniesMarket(Νεοαναπτυσσόμενων Εταιρειών Αγορά) (“ECM”).ECMisgovernedbyasimplifiedregulatoryenvironmentwhichhasbeenspecificallydesignedfortheneedsofsmallandemergingcompanies.

Regulatory environment

ECMcompaniesaregovernedbytheregulativedecisionsoftheCSEwhichsetouttherequirementsandguidanceforcompaniesquotedorwishingtobequotedonECM.

Who is it addressed to?

ECMisaimedat:• Privatecompaniesseekingfundingandeasyaccess

tothesecondarymarket• Investorsseekingnewtypeofinvestments,taking

intoaccountthehigherriskoftheECM• Publiccompaniesunwillingtoincurthehighercosts

ofregulatedmarkets

The decision to float

Onceyouhavedecidedtofloat,youwillneedtocriticallyappraiseyourexistingbusiness,identifyingtheextenttowhichitwillmeettheECMadmissionrequirements.Theserequirementsmaybeanalysedintothefollowingareas:

• Generalsuitability-preparationandplanning• Eligibilityforadmission• Continuingobligations/filingrequirements

General suitability and initial considerations

Planningandgoodpreparationarecrucialtoasuccessfulflotation.Thefollowingarethekeysuitabilityissuesthatyouwillneedtoconsider:• Preparationofawellconstructed,attractiveinvestor

‘story’• Establishinganexperiencedboardofdirectorsand

managementteam• Corporategovernanceimplications• Suitabilityofexistingcapitalandorganisation

structure• Appropriatenessofthefinancialtrackrecord• Qualityofmanagementinformationandfinancial

reportingprocedures• Taxplanning• Legalhousekeeping

Floating on the Emerging Companies Market

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Eligibility for admission

AcompanymustmeetthelistingsrequirementsassetoutintheregulativedecisionsoftheCSE.Themainrequirementsaresetoutbelow:

Main listing requirements • Tradingrecordsandauditedfinancialstatements

foratleastthetwoyearsprecedingapplication,ifapplicable

• “Newlyestablishedcompanies”canbeadmittedtotheECM,providedthattheCounciloftheCSEissatisfiedthatinvestorsareprovidedwithadequateinformationtoenablethemtoassessproperlythevalueofthetitles

• Theissuershouldbeapubliccompany,withasatisfactorynumberofinvestors

• Nominimummarketcapitalisationrestrictions• Nominimumshareholdersequityrestrictions• AppointmentandretentionofaNominated

Advisor(“NOMAD”)*• Nominimumdispersion(Nominimumnumbersof

sharestobeinpublichands)• Productionofanadmissiondocument

*TheNOMADmustberegisteredwiththeCSE.SeetheCSE websiteforalistofapprovedNOMADs.

Cyprus tax considerations

TheprofitarisingfromthesaleofsharesbyCyprustaxresidentsisexemptfromincometaxandisnotsubjecttospecialdefencecontribution.

AlsoanygainrealisedonthesaleofsharesofacompanylistedonECM(oranyotherCSEmarket)isnotsubjecttoanyCapitalGainsTax,regardlessofwhetherthecompanyownsimmovablepropertysituatedinCyprus.

Ways of achieving a listing

• Bypublicoffer:iftheofferishigherthan2.5millionEurosANDisaddressedtomorethan100potentialinvestors,aProspectusandanapprovalfromthe CyprusSecuritiesandExchangeCommission (“CySEC”)arerequiredinadditiontotheAdmissiondocumentbeingapprovedbytheCSE.

• Byprivateplacement:iftheofferis:- onlyaddressedtoinstitutionalinvestors;or- tofewerthan100potentialinvestorsORfundsraisedarelessthan2.5millionEuros,noProspectusisrequired;onlyanAdmissionDocumentwhichneedsnoapprovalfromtheCySEC.

• Combinationofthetwomethodsabove.

• Bylistingexistingshares:anAdmissionDocumentisneeded,whichrequiresonlyCSEapproval.

Admission Document

TheissuermustprepareandsubmittotheCSEtheAdmissionDocumentwhichasaminimummustinclude:

• Historyofthebusiness• Adequatebusinessplan(shortandlongtermplans

oftheissuer),butnofinancialforecastsarerequired• Informationonthedirectorsandsignificant

shareholders• Informationabouttheplacingorofferofthe

subscription• RiskFactors• AuditedfinancialstatementspreparedunderIFRS

forthetwoyearspriortothelisting(ifapplicable)• Useofthelistingproceeds

AguidetoaflotationontheEmergingCompaniesMarket3

Continuing obligations and financial reporting

Themainrequirementsaresetoutbelow:

Continuingobligationsandfinancialreporting

• Annualauditedaccountsmustbesignedandpublishedwithinfourmonthsoftheyearend

• Half-yearlyreports(unaudited)mustbepublishedwithintwomonthsoftheperiodend

• AnnouncementofanychangesinthecollaborationbetweentheissuerandtheNOMAD,accompaniedwiththereasons

• Inordertoensuretheearlynotificationtoinvestors,listedcompanieshavetheobligationtoannouncetotheCSEimmediately,andifpossibleatleastonehourbeforetradingbegins,anydecisionrelatingtothefollowingmatters:- Decisiontopayornottopayadividend,thedistributionofprofitsorthepaymentofinterestconcerninglistedsecurities

- Approvaloffinancialresultsandaccountsandhowthesewillbepublished

- Inthecaseofbonds,anydecisiontakenforanewissueandespeciallyanymattersassociatedwithindemnitiesorcollateral

- Anydecisiontakenconcerningchangesinthecapitalstructureofthecompany

- Anysignificantchangesintheoperationsoftheissuer

- Anychangesinthepositionsofchairman,memberoftheboardofdirectors,seniormanagement,theauditorsoranyotherexecutive

- PublicationandsubmissiontotheCSEofthedispersionofsharesinthelistedentityonthelastworkingdayofthecalendaryear

Role of the NOMAD

TheinitialroleoftheNOMADistoensurethatthecompanyisappropriatetobequotedontheECMandensurethattherelevantrulesarecompliedwithonflotation.ANOMADmustberetainedatalltimestoadvisethecompanyandtoensurethatitcomplieswiththerelevantECMruleonanongoingbasis.

How can PwC help?

PwCisaCSEapprovedNOMAD.Wehaveastronganddistinct,regulatory-compliantbrandwhich,wefeel,lendsweighttoanyprospectivelistingintheeyesofboththeCSEECMteamandpotentialinvestors.

OurNOMADrolewouldinclude:

During the admission process

• “sponsoring”thecompany’sadmissiontoECM,confirmingtotheCSEtheappropriatenessofthecompanyforlisting;

• ensuringcompliancewiththeECMrules;• leadingthedraftingoftheprospectus/admission

document;and• projectmanagingtheoverallprocessleadingtoa

listing.

Post admission

• WewouldcontinuetoactasNOMADfollowingadmission,advisingyouonyourongoingobligationsasalistedcompany.

Asanindependentfinancialadvisor,weprovideourclientswithobjectiveadviceontheirstrategicoptions,includingfund-raising,take-overandexitoptions.Throughourextensiveregionalandglobalnetwork,wehaveaccesstospecialistM&Ateamswithstrongsectorandgeographicknowledgeandexperience.

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The PwC Capital Markets group

ThePwCCapitalMarketsGroupcomprisesspecialistswhoprovideabroadrangeofservicestocompaniesandinvestmentbanksinconnectionwithcapitalmarkettransactions,including:

• Preparationforbecomingapubliccompany(tax,operationalandfinancialrestructuring,managementandemployeeincentiveschemes,IPOdiagnostic)

• Actingasreportingaccountantoncapitalmarketstransactions

• Undertakingfinancialandbusinessduediligenceinvestigations

• Advisingonregulatoryissues• Selectingtherightmarketandadvisoryteam

ThePwCCapitalMarketsgroupispartofthePwC’sglobalnetworkofcapitalmarketsspecialists.

Contacts

Nicos Theodoulou PartnerCapitalMarketsTel.+35722555587nicos.theodoulou@cy.pwc.com

AguidetoaflotationontheEmergingCompaniesMarket5

Comparison of admission criteria and on-going obligations of the CSE markets

Non-regulated market

Regulated markets

ECM Alternative Parallel MainAdmission criteriaMinimum Market Capitalization

No €1m €6.8m €15 m

Equity Capital No €1m(2 years before listing)

€8.5m(2 previous years)

€13.6m(2 previous years)

Dispersion (minimum investors in brackets)

No 10%(100)

20%(300)

25%(1000)

Minimum Financial Track Record

2 years (if applicable)

2 years 3 years with positive net position

4 years with positive net position in the year preceding listing

Mandatory Adoption of Corporate Governance Code

No No Partially Fully

On-going obligationsFinancial reporting • Annual audited

accounts • Semi-annual

report under IAS 34

• Annual audited accounts

• Semi-annual accounts under IAS 34

• Annual audited accounts

• Semi-annual accounts under IAS 34

• Annual audited accounts

• Semi-annual accounts under IAS 34 Quarterly accounts

Interim management statement

No During every six month period of the financial year

During every six month period of the financial year

During every six month period of the financial year

Announcement of dates of Board of Directors’ meetings

No 10 days before the meeting

10 days before the meeting

10 days before the meeting

Publication and submission of dispersion report

Last working day of the calendar year

Last working day of each quarter in the calendar year

Last working day of each quarter in the calendar year

Last working day of each quarter in the calendar year

Profit warning announcement No Within 2 months of the period end

Within 2 months of the period end

Within 2 months of the period end

Announcement of dealings between the listed entity and members of its management

No Next working day Next working day Next working day

Maintain a NOMAD Yes Not applicable Not applicable Not applicableMaintain website No No Yes Yes

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AguidetoaflotationontheEmergingCompaniesMarket7

Wearestrivingtoofferourclientsthevaluetheyarelookingfor,valuethatisbasedontheknowledgethatourteamsdrawfrom161.000expertsin154countriesandbasedonexperienceadaptedtolocalneeds.PwCCyprusfocusesontwomainareas:Assurance&AdvisoryServicesandTaxandLegalServices.Weworkcloselywithourclients.Weaskquestions.Welisten.Welearnwhattheywanttodo,wheretheywanttogo.Fromallourinternationalknowledgewesharewiththemthepiecethatismoresuitableforthemandthuswesupportthemonhowtoachievetheirgoals.

Intheoperationoftheworld’scapitalmarketsweplayanimportantroleandasbusinessadvisorswehelpourclientssolvecomplexbusinessproblems.Weaimtoimprovetheirabilitytomanageriskandimproveperformance.Atthesametimewetakeprideinourqualityserviceswhichhelptoimprovetransparency,trustandconsistencyofbusinessprocesses.

Ourpositionisstrengthenedwithouralmost1.000professionalsandourofficesthroughoutCyprus.

PwC in Cyprus

Assurance & Advisory ServicesOurFinancialAssuranceservicescompriseofstatutoryandregulatoryauditservices,whichincludeevaluationofinformationsystems,advisoryservicesforcapitalmarkettransactions,accountingandregulatoryissuesforalltypesofbusinessesthroughspecialistindustrydivisions:

FinancialServices(FS),ConsumerandIndustrialProductsandServices(CIPS)andTechnology,Information,Communications,EntertainmentandMedia(TICE).

OurRiskAssuranceConsulting(RAC)offersexpertiseoninternalauditservices,internalcontrolsoptimisation,corporategovernanceandreporting,aswellasassuranceandadvisoryservicesrelatedtosecurityandcontrolsofinformationtechnologysystemsincludingEnterpriseResourcePlanning(ERP)systems(e.g.SAP,Oracle,Navision),ProjectImplementationAssurance(PIA),ComputerAssistedAuditTechniques(CAATs),SpreadsheetIntegrityandITRiskDiagnosticandBenchmarking.Aparticularfocusoftheteamisinsupportingthefinancialservicesindustryonmattersrelatedtoregulatorycompliance,licensingandriskmanagement.

OurPerformanceImprovementConsulting(PIC)isofferingspecialistadvisoryservicesonstrategyandoperationaleffectiveness,processimprovement,costreduction,peopleandchangeandsustainabilityissues.

OurDeals&CorporateFinance(DCF)providesconsultingonM&A’s,valuations,feasibilitystudies,transactionssupportandcrisismanagement.

Tax and Legal ServicesOurPwCnetwork’staxandlegalservicesincludeGlobalComplianceServices,DirectandIndirectTaxServices,ServicestoSmallandMediumEnterprisesandLegalServices.

Global Compliance ServicesComprisingthewholespectrumofcompanyadministrationandcorporatestatutorycomplianceservices,bookkeeping,accountingandpayrollservicesaswellasspecialisedservicessuchasprivateclientservices,adviceonestablishmentandadministrationoflocalandinternationalbusinesscompanies,collectiveinvestmentschemes,UCITS,investmentfirmsandtrusts.

Direct tax servicesCorporate:AdvisoryServicesfortaxplanning,internationaltaxstructuring,mergersandbuyoutsandotherbusinessissues,taxreturnsadministration,agreementwithTaxAuthoritiesandobtainingtaxrulings.

Personal:Taxplanning,completionsubmissionandagreementoftaxreturns,taxservicestoexpatriates,pensionersandothernon-Cypriotindividuals.

Indirect Tax Services VAT:AdvisoryservicesforVAT,VATrecoveryandVATminimisationandtaxcompliance(administrationofVATreturns,communicationwithVATauthorities,agreementofdisputedassessments,etc).

Services to Small and Medium Enterprises (SME)TheServicestoSmallandMediumEnterprisesareaddressedtoindividuals,smallandmedium-sizedenterpriseswithlocalactivityandcoverthewholespectrumofaccounting,tax,VAT,familybusinessandfinancialstructuringandstatutorycomplianceservices.

Legal ServicesThelegalfirm,fullmemberofthePwCnetwork,offerslegalservicesthatcoverthewholespectrumofcorporateandbusinesslaw,includingadvisingandrepresentingclientsinM&Atransactions,re-organizations,EuropeanUnionlawandCompetitionlaw,settingupandregulatingprivatecompanies,settingupjointventuresandotherformsofbusinessesandcarryingoutlegalduediligence.

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PwC offices in Cyprus

Nicosia

Mailing address: P O Box 21612, CY-1591 Nicosia, Cyprus

Street address: Julia House, 3 Themistocles Dervis Street, CY-1066 Nicosia, Cyprus

Tel. +357 - 22555000 , Fax +357 - 22555001

Limassol

Mailing address: P O Box 53034, CY-3300 Limassol, Cyprus

Street address: City House, 6 Karaiskakis Street, CY-3032 Limassol, Cyprus

Tel. +357 - 25555000, Fax +357 - 25555001

Larnaca

Mailing address: P O Box 40450, CY-6304 Larnaca, Cyprus

Street address: Artemidos Tower, 7th & 8th Floors, 3 Artemidos Avenue, CY-6020 Larnaca Cyprus

Tel. +357 - 24555000, Fax +357 - 24555001

Paphos

Mailing address: P O Box 60479, CY-8103 Paphos, Cyprus

Street address: City House, 58 Grivas Dighenis Avenue , CY-8047 Paphos, Cyprus

Tel.+357 - 26555000, Fax +357 - 26555001

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